Prime Minister John Key says people should not to jump to conclusions about mining on the conservation estate.
Conservation lobby group Forest and Bird said on Monday Cabinet was considering opening up 7000 hectares of high-value conservation land to mining.
Forest and Bird says the only way to extract coal or gold is by destructive open-cast mining, and land that may be mined includes conservation land on Coromandel Peninsula, Great Barrier Island and Eastern Paparoa National Park on the West Coast.
The Government is preparing a discussion paper following a stocktake of the mineral wealth in high-value conservation land protected under Schedule 4 of the Crown Minerals Act.
Mr Key will not confirm what Cabinet has considered, but is confident that economic and environmental matters will be balanced and New Zealand's international reputation will be protected.
The Prime Minister says decisions will be based on what strikes a balance between lifting economic performance and caring for the environment.
He says from the paperwork he has seen so far he is confident that the balance is in the right place, with the goal of lifting the country's economic performance but in an environmentally friendly way.
Mr Key says a discussion document is likely to be released within a few weeks.
He says it will look at all of the conservation estate, not just land protected under Schedule 4.
Labour Party leader Phil Goff says that is a red herring and the Minister of Conservation can already allow mining on land which is not covered by Schedule 4.
Mr Goff says it appears the Government is backing off its original plan to allow mining of sensitive land.
Lobby group 'scaremongering' - mayor
Grey District mayor Tony Kokshoorn accused Forest and Bird of scaremongering about the type of mining the Government is considering allowing on high value conservation land.
Mr Kokshoorn says the Resource Management Act will ensure that any mining carried out does not compromise conservation values.
"There is scaremongering going on with Forest and Bird that are trying to make it look as though we're bringing back out the chainsaws, we're sawing down all the podocarp trees in the forest and we're going to make a mess of things.
"It's the last thing we're going to let happen."
Mr Kokshoorn says the potential economic benefits of allowing more mining on the West Coast are huge, and believes they can be balanced with environmental values.
Forest and Bird says it is not scaremongering. Conservation manager Kevin Hackwell says the group is simply revealing what's under consideration by Cabinet.
He also says a decision to re-write the Cabinet papers shows that the Government is fearful of public reaction to the plan.
Mr Hackwell says the public needs to be made aware of what Cabinet will be discussing.
He believes strong public opposition will force the Government to re-think any decision to extend mining operations on conservation land.